Selling property: how to set the right price and adjust it correctly
The sale price is the deciding factor between success and stagnation. How do you determine the realistic market value of your property – and when is it time to rethink the selling price?
Author: Bernhard Bircher-Suits, FundCom AG
For many people, selling their home is one of the most important financial decisions they will make in their lives. This makes it all the more important to determine the right sale price. A price that is too high can deter potential buyers and prolong the sale process unnecessarily. A price that is too low, on the other hand, reduces the proceeds. But how do you determine the realistic market value and when does it make sense to adjust the price?
The right property price: the market decides
A property’s value is not derived from personal expectations, but from the market. Experts refer to the “market value” of a property, i.e. the price that buyers are currently prepared to pay. It is important to understand that the tax value in your tax return or the building insurance value on your insurance policy are used for other purposes and do not give you any indication of the possible market value.
The factors influencing a property’s market value
As property professionals will tell you, location is crucial. Good public transport connections and proximity to schools, shops and green spaces increase value, while noise, traffic or a lack of infrastructure reduce the price. The market value of a property is based on the actual sale prices achieved by comparable properties as well as the location, condition, fit-out standard and floor plan.
In addition, specific plot and building features such as living space and construction quality, as well as the current market situation – in terms of supply, demand, interest rates and regional price trends – are taken into account in the valuation. A long-standing need for renovations, on the other hand, often leads to price negotiations.
For example, a 4-room apartment in a quiet neighbourhood with a tram connection will fetch much higher prices than a comparable apartment on a busy street – even within the same municipality.
Hedonic valuation – the Swiss standard
Many homeowners start with what is known as a “hedonic” property valuation. This compares the property statistically with thousands of recently sold properties. This method is well established in Switzerland and is also used by banks when offering mortgages.
Obtaining a hedonic valuation for a detached house can cost between CHF 300 and CHF 600, depending on the provider and the level of detail. In the case of apartment buildings, valuation methods such as the capitalised earnings method or an expert appraisal are more likely to be used. Depending on the size of the property, costs vary between CHF 1,500 and CHF 5,000.
Benefits of hedonic property valuation
- Fast and cost-effective
- Market-oriented and data-based
- Ideal for detached houses and apartments
The disadvantages of this method: accuracy depends heavily on the availability of current transaction data. In less liquid markets or for rare property types, the estimation can be significantly less accurate. The specific condition, the micro-location or qualitative aspects such as noise, views or neighbourhood are only taken into account indirectly or not at all.
When a professional valuation is worthwhile
For special properties – listed townhouses, large plots of land or properties with planning permission for development – a professional on-site valuation is also recommended. This takes into account:
- structural and legal peculiarities
- micro-location and district development
- local market knowledge
For example, a detached house with a new heat pump, modern windows and a renovated bathroom generally sells faster and for a higher price than a property with outdated heating and a renovation backlog.
Using statistical data for pricing
The Swiss Residential Property Price Index (IMPI) published by the Federal Statistical Office shows quarterly trends in prices for single-family homes and apartments. This data provides important guidance for sellers, in particular with regard to general market trends and price developments.
However, it only shows average values and does not allow any direct conclusions to be drawn about the actual value of an individual property, since property-specific factors such as location, condition or fittings are not taken into account.
Realistically assess your negotiation margin
Slightly overpricing a property is common when selling. In practice, pricing between 5% and a maximum of 10% above market value has proven effective. Higher mark-ups than this often mean that prospective buyers do not even enquire.
Don’t forget selling costs: what’s left of the price
The sale price achieved does not automatically correspond to the amount that you will actually receive at the end. Selling a property involves various costs, some of which can significantly reduce the net proceeds. Property gains tax, which varies from canton to canton and depends on the duration of ownership and the amount gained, is particularly significant.
Property gains tax: example and impact on net proceeds
An example will illustrate the impact of property gains tax: let’s say a detached house is sold for CHF 1,000,000 after a 10-year holding period. If the property was originally purchased for CHF 700,000 and no significant value-enhancing investments were made, this results in a taxable gain of CHF 300,000.
In the canton of Zurich, property gains tax is progressive and takes into account the duration of ownership. After 10 years, a reduced tax rate applies, but it is still within the relevant range. For a gain of CHF 300,000, the tax – depending on the municipality – can be roughly between CHF 60,000 and CHF 90,000.
This reduces the effective proceeds: in this example, after the deduction of property gains tax from the sale price of CHF 1,000,000, around CHF 910,000 to CHF 940,000 is left, before other costs such as broker fees or charges are taken into account. This example shows that property gains tax is one of the biggest cost factors when selling property and should be planned for in advance.
Additional costs relating to sales and preparation
In addition, there are notary and land registry fees that are incurred for the legal processing of the sale. There are also preparatory measures that incur costs: these include, for example, the GEAK energy certificate, professional sales documents and minor renovations aimed at increasing the sale value. In many cases, home staging is also worthwhile to present the property in the best possible light. If an estate agent is appointed, they will also take a fee, which is usually calculated as a percentage of the sale price. These factors should be taken into account at an early stage so that you can realistically estimate the actual net proceeds.
No enquiries? What the market is saying
If there are no viewings or enquiries, price is often the main reason. Properties that have been online for a long time are often perceived as “problematic” by buyers – with the risk of being sold below market value later on. Studies on the time properties spend on the market clearly show this effect. A realistic pricing strategy from the outset is therefore crucial for keeping this period short.
When does it make sense to reduce the price?
If there is little response after around 4 weeks, it’s worth checking:
- Is the price higher than comparable properties on offer?
- Are there any new competitor properties?
- Does the listing make a good impression visually and in terms of content?
Effective price reduction
A moderate price reduction of 5–10% can significantly increase visibility. Prices set just below round thresholds, such as CHF 999,000 instead of CHF 1,000,000, are particularly effective.
Don’t readjust too often
Making many small reductions projects a lack of confidence. A better approach is to:
- Check the price after 4–6 weeks
- Make a one-off adjustment
- Monitoring market response
Further measures to boost demand
An updated listing can noticeably increase demand, especially if it is clear that the price has been reduced. Professional photos and appealing floor plans also play a key role in attracting potential buyers’ attention and generating more viewings.
In addition, even small upgrades often have a surprisingly big impact: freshly painted walls, tidy rooms and good lighting significantly improve the overall impression and can increase your selling prospects.
In summary: get the best possible sale price with a strategy
The optimal sale price is determined by market analysis, objective evaluation and a clear strategy. Location, condition, comparative valuations and market trends are key. If there is no demand, a well-justified price adjustment after a few weeks is often the most effective step – for a successful sale at the best possible price.
